"AI Faith" welcomes catalyst again? Micron Technology, Inc.'s performance guidance will become the focus of the market.

Notice that Micron Technology, Inc. (MU.US) may be the latest chip maker to prove to investors that there is still strong demand for artificial intelligence-related devices. Like many of its peers, the company may also acknowledge that other major demand areas such as personal computers and smartphones are still sluggish. Notice that the company will release its earnings report after the US stock market closes on Wednesday, analysts expect strong growth in its high-bandwidth memory chips used for artificial intelligence data processing. Positive assessments of artificial intelligence demand could revive the trade in artificial intelligence chips, as previous earnings reports from Broadcom Inc. and NVIDIA Corporation were mixed, leading to a stagnation in the industry. The forecasts of these two companies have disappointed demanding investors, much like the reaction to Micron's latest forecast three months ago. Revenue grew by over 80%, but the outlook disappointed the market's expectations for artificial intelligence to provide a greater boost. This year, Micron's stock has fallen by nearly 40% from its high point in June, lagging behind other chip makers, and now it appears that Micron could be one of the most cost-effective stocks in the sector. "Last quarter, Micron Technology, Inc. became a sacrificial lamb of high expectations, but since then its stock has dropped significantly, which means now it could be a beneficiary of low expectations," said Christian Fromhertz, CEO of Tribeca Trade Group. "It must send out positive signals to break through resistance levels, but it seems that people believe it's worth a try at its current level." Fromhertz said that a positive performance could push the stock to break through $100 again, and may even push it above the 105-dollar level of the 200-day moving average. However, he noted that falling below the recent support around $86 would be a bearish signal. There are signs in the options market that sentiment for Micron is strengthening. The ratio of open puts versus open calls for Micron is only half of what it was a year ago. Recently, there have been more bullish positions than bearish ones, with large positions in the $100 strike calls set to expire two days after earnings are announced, and even larger positions in the $95 and $155 strike calls. Options expiring in October are the most bullish since late July, after the volatility shock at the beginning of the month accelerated selling in tech stocks. Citigroup predicts that Micron's stock will remain weak until the trend of DRAM memory chip prices reverses, with the reversal expected to occur within three to six months. Despite a "buy" rating on Micron, analyst Christopher Danely pointed out that short-term market sentiment is weak. "Based on discussions with several investors this week, it seems that about 80% of them are pessimistic about Micron. Every hedge fund we interviewed is pessimistic, but there are also a few mutual funds with optimistic views." In the long term, there is still optimism for Micron. According to analysts' average target price, Micron's expected 12-month return is over 50%, the highest among chip makers up to now. Additionally, Micron's expected price-to-earnings ratio is around 10, making it the cheapest stock in the Philadelphia Semiconductor Index. In comparison, NVIDIA Corporation has a price-to-earnings ratio of over 32, while ARM has the highest ratio, nearing 80. Industry Catalysts However, many investors remain skeptical. Despite artificial intelligence being seen as a growth driver, Micron's other markets including personal computers and smartphones, as it is a supplier to Apple Inc. are still recovering from last year's sluggishness. Broadcom Inc.'s performance also showed weakness in non-artificial intelligence businesses. Additionally, Micron faces challenges in increasing production of new memory chips. BNP Paribas downgraded the stock by two notches recently, from "outperforming the market" to "underperforming the market," becoming the only company tracked by Bloomberg to suggest selling the stock. Analyst Karl Ackerman wrote, "While some investors correctly predicted the recent downside risks to performance, we believe that by 2025, Micron's performance will lag behind its artificial intelligence peers." His $67 target price is the lowest on Wall Street. The key issue is to what extent the challenges the company faces are already reflected in its valuation. Daniel Morgan, Senior Portfolio Manager at Synovus Trust, remains optimistic and believes that Micron's performance could be a catalyst for the entire industry. Morgan said, "The worst is behind us, and the artificial intelligence theme has the potential to outperform for the next few quarters. If Micron can confirm that there is substance behind this excitement, it will boost the entire artificial intelligence sector. This is what the market is eagerly awaiting."